Volume : 3 | Issue : 6 | June 2014 ISSN - 2250-1991

1 | PARIPEX - INDIAN JOURNAL OF RESEARCH

Research Paper
A Comparative Study on Cash Flow Statements
of Tata Chemicals Ltd. and Pidilite Chemicals Ltd.
Commerce
KALPESH GELDA
ASSISTANT PROFESSOR, NATIONAL COLLEGE OF COMMERCE,
AHMEDABAD
Dr. BHAVSINH M.
DODIYA
ASSISTANT PROFESSOR, J.C. DHANK ARTS AND COMMERCE
COLLEGE, BAGASARA
KEYWORDS
Cash, Cash equivalents, Operating Activities, Investing Activities, Financing Activities
A
B
S
T
R
A
C
T
A cash ow statement is required as part of a complete set of nancial statements prepared in conformity with Indian
Accounting Standards. AS-3 lays down a formal structure for the cash ow statement. Cash ows should be classied under
the following three standard headings: Operating activities, Investing activities, Financing activities. The classication
of cash ows among operating, investing and nancing activities is essential to the analysis of cash ow data. Net cash
ow (the change in cash and equivalents during the period) has little informational content by itself; it is the classication
and individual components that are informative. Although the classication of cash ows into the three main categories is
important, it should be mentioned that classication guidelines are arbitrary.
INTRODUCTION :-
The users of an enterprises nancial statements are interest-
ed in how the enterprise generates and uses cash and cash
equivalents. This is the case regardless of the nature of the
enterprises activities and irrespective of whether cash can be
viewed as the product of the enterprise, as may be the case
with a nancial enterprise. Enterprises need cash to conduct
their operations, to pay their obligations and to provide re-
turns to their investors.
Success of every business depends on its cash management.
The supply of cash is frequently a limitation on the successful
execution of many policies and programs. So it is necessary to
study the composition of cash of company to know the im-
pact of its cash ow decision on its liquidity, protability and
solvency.
In this study, the matters relating to the cash ow statements,
which normally forms a part of the nancial statements of
various enterprises to which the Accounting standard (AS) 3,
Cash Flow Statements, become mandatory as given by ICAI,
is discussed in the light of, and on the basis of, the said Ac-
counting Standard.
OBJECTIVES :-
There are three important activities which are the signicant
parts of Cash Flow Statements. The analysis of all these activi-
ties is undertaken with the following objectives :
(1) To undertake comparative study on Operating Activities for
the period of study of selected companies.
(2) To undertake comparative study on Investing Activities for
the period of study of selected companies.
(3) To undertake comparative study on Financing Activities for
the period of study of selected companies.

RESEARCH METHODOLOGY :-

SAMPLE SELECTION
For the purpose of the study two (2) companies from Chemi-
cal Industry i.e. Tata Chemicals Ltd. and Pidilite Chemicals Ltd.
have been selected.
PERIOD OF STUDY
The study is conducted for a period of ve (5) nancial years
i.e. from 200809 to 201213.
DATA COLLECTION
In this study, mainly secondary data is collected. Secondary
data has been obtained from the following sources :
Published Annual Reports of the companies for the fnan-
cial years 200809 to 201213.
Directory of Mumbai Stock Exchange
Websites of the selected companies
Other related websites

STATISTICAL TOOLS AND TECHNIQUES
The statistical analysis technique is selected to analyze the
Cash Flow Statements of the companies understudy. For this,
following techniques are being used.
(a) Mean
(b) Standard Deviation
(c) Co efcient of Variation

COMPARATIVE STUDY (Rs. In crores)
ACTIVITIES
2008-09 2009-10 2010-11 2011-12 2012-13
TATA PIDILITE TATA PIDILITE TATA PIDILITE TATA PIDILITE TATA PIDILITE
Cash ow from Operating
Activities
1027.87 260.23 843.07 429.91 427.78 322.41 340.73 506.91 223.34 512.7
Cash ow from Investing Activities -684.93 -227.99 -48.35 -337.46 -248.19 -37.06 89.29 -231.52 -238.74 -196.75
Cash ow from Financing Activities -91.55 -53.72 -7951.51 -186.56 -15592.78 -245.86 -336.93 -285.84 130.33 -325.82
Volume : 3 | Issue : 6 | June 2014 ISSN - 2250-1991
2 | PARIPEX - INDIAN JOURNAL OF RESEARCH
COMPARATIVE CHART FOR OPERATING ACTIVITIES

COMPARATIVE CHART FOR INVESTING ACTIVITIES

COMPARATIVE CHART FOR FINANCING ACTIVITIES
MEAN, STANDARD DEVIATION AND CO-VARIANCE
OPERATING ACTIVITIES
C
O
M
P
A
N
Y
Average
(Mean)
Rank
Standard
Deviation
Rank Co-Variance Rank
TATA 572.56 1 308.92 2 53.95 2
Pidilite 406.43 2 100.37 1 24.7 1

INVESTING ACTIVITIES
C
O
M
P
A
N
Y
Average
(Mean)
Rank
Standard
Deviation
Rank Co-Variance Rank
TATA -226.18 2 261.63 1 -115.67 1
Pidilite -206.16 1 97 2 -47.05 2
FINANCING ACTIVITIES
C
O
M
P
A
N
Y
Average
(Mean)
Rank
Standard
Deviation
Rank Co-Variance Rank
TATA -4768.49 2 6209.8 1 -130.23 1
Pidilite -219.56 1 94.83 2 -43.19 2

FINDINGS :-
The Performance evaluation can be examined with the use
of different techniques accounting as well as statistics. All
these techniques have certain limitations and merits. To come
to the reasonable conclusion apart from accounting analysis
the use of statistics is also applied. By cash ow statement the
trend and measurement of three activities to be done for eval-
uation purpose. And for all these activities comparison with
other statistical techniques become necessary. Average is cal-
culated to see the quantum of different companies for each
company for given period of time. Subsequently ranks are al-
lotted on the basis of their quantum. But this does not serve
the complete purpose hence standard deviation is calculated
and ranks are given to them on the basis of their results. This
helps to know variation of respective activates for given peri-
od of time from its coverage. Theoretically higher the standard
deviation, lower the rank and vice versa. Finally co efcient
variation is also calculated to know the consistency level of
each activity of each company and ranks are given according-
ly. Theoretically higher the co efcient, lower the consisten-
cy.
(1) Average :
Theoretically higher the average, higher the rank and vice
versa.
For Operating activities, Average of TATA Co. (Rs. 572.56
crore) is greater than Pidilite Co. (Rs. 406.43 crore). Ac-
cordingly, TATA is given 1
st
rank and Pidilite is given 2
nd

rank.
But, for Investing activities and Financing activities, Average
of Pidilite Co. is greater than the TATA Co. So, Pidilite is
given 1
st
rank and TATA is given 2
nd
rank.

(2) Standard Deviation :
Theoretically higher the Standard Deviation, lower the rank
and vice versa.
For Operating activities, Standard Deviation of TATA is
308.92 whereas for Pidilite Co. it is 100.37. It is lower in
Pidilite Co. So, it is given 1
st
rank and TATA Co. is given 2
nd

rank.
But, for Investing activities and Financing activities, Stand-
ard deviation of TATA Co. is lower than the Pidilite Co. So,
TATA is given 1
st
rank and Pidilite is given 2
nd
rank.

(3) Co Efcient of Variation :
Theoretically higher the Co-effcient of Variation, lower the
rank and vice versa.
For Operating activities, Co-effcient of Variation of for Pid-
ilite Co. (24.70) is less than TATA Co. (53.95). Accordingly,
Pidilite is given 1
st
rank and TATA is given 2
nd
rank.
But, for Investing activities and Financing activities, Co-eff-
cient of Variation of TATA Co. is lower than the Pidilite Co.
So, TATA is given 1
st
rank and Pidilite is given 2
nd
rank.

OVERALL CONCLUSION
Level
Operating
Activities
Investing
Activities
Financing
Activities
Best PIDILITE TATA TATA
Poorest TATA PIDILITE PIDILITE
LIMITATIONS OF THE STUDY :-
Every researcher tries to give justice to his research. Yet, there
are some limitations to his ndings because he has to depend
on information given by some published or unpublished re-
cords and other sources. So, the further research can be car-
ried out by considering the aspects given below.
This study is entirely based on the published nancial state-
ments of the company and other information received from
the company ofcials. So, all analysis is based on this data. So
it can be reliable to that extent.
(1) As the information is collected from limited sources, it is
not possible to use different tools and techniques of statis-
Volume : 3 | Issue : 6 | June 2014 ISSN - 2250-1991
3 | PARIPEX - INDIAN JOURNAL OF RESEARCH
REFERENCES
M. Y. Khan, P. K. Jain, Financial Management 2001, Third Edition, Tata McGraw Hill, Publishing Company Ltd., New Delhi. | Dr. P. C. Tulsian Financial Management,
2009, First Edition, S. Chand & Co. Ltd., Ram Nagar, New Delhi 110 055. | J. Made Gowda Accounting for Managers, 2009, First Edition, Himalaya Publishing House
Pvt. Ltd., Ansari Road, Darya Ganj, New Delhi 110 002. | Dr. P. Periasamy A Textbook of Financial Cost and Management Accounting, 2009, First Edition, Himalaya
Publishing House Pvt. Ltd. Ansari Road, Darya Ganj, New Delhi 110 002. | C.R.Kothari, Research Methodology- Methods and Techniques. | S.N. Maheshwari and S.K.
Maheshwari A Textbook of Accounting for Management 2006 (1st edition), Vikas Publishing House Pvt. Ltd., New Delhi-110014. | J. Made Gowda Accounting for
Managers, 2009, First Edition, Himalaya Publishing House Pvt. Ltd., Ansari Road, Darya Ganj, New Delhi 110 002. | Dr. P. Periasamy A Textbook of Financial Cost and
Management Accounting, 2009, First Edition, Himalaya Publishing House Pvt. Ltd. Ansari Road, Darya Ganj, New Delhi 110 002. | N Ramchandran, Ram Kumar Kakani
How to Read a Cash Flow Statement 2010, The Mcgraw Hill Education Private Limited, West Patel Nagar, New Delhi 110008. | Debarshi Bhattacharyya Management
Accounting, 2010, Dorling Kindersley (India) Pvt. Ltd., Panchsheel Park, New Delhi - 110017. |
tical analysis.
(2) The study is based on secondary data; the secondary data
has its own limitation.
(3) Some external factors also could affect directly or indirect-
ly to the companies efciency. But it is not easy to judge
completely right about them.
(4) The entire study is limited to two companies only. It can be
carried out by including Industry.

CONCLUSION AND RECOMMENDATION :-
A materially misstated cash ow statement, whether it is in
terms of incorrect classication in the categories or numerical
accuracy, can be misleading to the user and can lead to wrong
decisions taken by the users of the statement. The survey has
revealed that although sample banks prepare cash ow state-
ment according to Accounting Standard-3 (AS-3), there is also
a degree of non-compliance. It is, however, found that there
are not many differences between companies in their report-
ing of cash ow information. This is expected because the
preparation of cash ow statement does not allow for many
choices, differences of interpretation or different accounting
treatments. To make cash ow statement more informative
and useful for users, the banks should disclose additional vol-
untary information such as cash ow per share in their cash
ow statements. Items consisting of cash ows from operat-
ing, investing and nancing activities should also be claried
in the notes of the nancial statements. Due to the limited
scope of the present study, a large number of research issues
have not been attempted but are identied in the course of
the study. Disclosure practices of additional items other than
operating, investing and nancing activities, disclosure practic-
es differences between listed and unlisted companies, disclo-
sure practices differences between nancial and other institu-
tions are some such potential issues for future research.